Contents

Chapter 15
The Public Trust

New roles for the Public Trust

RECOMMENDATION

R43 The new Trusts Act should provide that:
(1) Where carrying out any of the roles it has under the new Trusts Act would involve any element of dispute or contention or significant complexity, the Public Trust should not act.
(2) The Public Trust should be accountable to the Government for the exercise of its roles under the new Trusts Act.
(3) The Public Trust could charge a reasonable fee for carrying out the roles under the new Trusts Act.
Note
The roles recommended for the Public Trust in the Report are:
  • the power to make decisions on behalf of a trustee where the trustee is temporarily unavailable and cannot be contacted for any reason and no delegation is in place (R12);
  • overseeing the removal and/or replacement of a sole trustee on the ground of incapacity or similar where there is no one else with authority to do this apart from the court (R21);
  • overseeing the appointment of a replacement of a sole trustee who dies while in office where there is no one with the power to appoint a new trustee under the trust deed (R22);
  • overseeing the retirement and replacement of a sole trustee when there is no one else with the power to appoint a new trustee under the trust deed (R23);
  • providing a vesting certificate to confirm that assets are vested in a named new trustee where a former trustee has not and cannot now transfer the trust assets (R26).

Status of the Public Trust

15.2Under the Public Trust Act 2001 and the Crown Entities Act 2004, the Public Trust is established as a statutory corporation that is an autonomous Crown entity. It has functions relating to the business of providing estate management and administration services under the Public Trust Act, the Trustee Act 1956, and a number of other Acts. Under various statutes the Public Trust is given responsibility for managing public money, administering estates, filing certificates, holding securities, advancing and borrowing money on others’ behalf, executing instruments to discharge a mortgage and overseeing property managers’ property statements.299
15.3Under the Trustee Act, the Public Trust is required to accept an appointment as a replacement trustee, effectively making it the trustee of last resort.300 Following amendment in May 2013, the Act requires that, where the retiring trustee is a securities trustee, the Public Trust can only be appointed if the retiring trustee has failed to obtain another replacement and indemnifies the Public Trust for its reasonable fees and expenses in taking the appointment.301 This limit to the Public Trust’s obligation to perform the role of the trustee of last resort has been enacted because of particular concern regarding the failure of finance companies that use a trust structure and the significant cost to the Public Trust if it is required to be the replacement trustee in these trusts.302

Proposals in Preferred Approach PaperTop

15.4In the Preferred Approach Paper, we proposed that the Public Trust be given a number of roles under new trusts legislation. We saw the Public Trust as presenting an attractive alternative to the courts for carrying out relatively straightforward administrative processes and the provision of advice. It would act in place of a court in some situations resulting in reduced cost and delay.

15.5The roles that were proposed for the Public Trust in the Preferred Approach Paper were:

Submitter concernsTop

15.6These proposals elicited a significant number of comments from submitters, with most opposing proposals to give the extra roles to the Public Trust. The reasons given by submitters were:

15.7Submitters who tentatively agreed with all or some with the proposals expressed a desire to see the details of the arrangement, such as timeframes, costs, and processes for resolving conflicts of interest.

Reconsideration of the rolesTop

15.8Following submitter feedback, we have reconsidered the appropriateness of the Public Trust carrying out the roles we had proposed earlier. We think that the majority of the concerns from submitters arose in relation to the advice-giving roles where the Public Trust could have been seen as taking the place of a legal adviser or adjudicator. We now recommend confining the Public Trust’s new roles to situations where it either stands in the shoes of a trustee or where it is involved in the formal certification and validation of a process. These are akin to its current statutory roles and are less controversial as they are less adjudicative in nature.303 The new Act should make it clear that the Public Trust would only be able to exercise a decision-making power if there was no dispute, uncertainty or problems, in which case the matter would need to be decided by the court. It could preclude the Public Trust from being able to carry out the proposed roles where it is a trustee. We think the Public Trust should not be prevented from appointing itself as a replacement trustee.
15.9We agree with submitters that there should be some constraints on the Public Trust’s fee structure and processes, and accountability to the Government. As an autonomous Crown entity, the Public Trust is subject to the Crown Entities Act. The Public Trust is required to report quarterly and annually to the Minister responsible for the Public Trust on its commercial and non-commercial financial and operational performance. We see no difficulty for the Government in requiring performance information for the roles we recommend. We do not think it necessary for the Public Trust’s fees to be set by regulation and this can cause problems as it can be inflexible over time. The Public Trust’s fees should be required to be reasonable. We note that the Treasury has issued guidelines for user charges for services where Crown entities are monopoly suppliers, as would be the case here.304

Consideration of alternative optionsTop

15.10Because it was raised by submitters, we have reconsidered whether another option for a lower-level decision-maker is viable. The options of having the other statutory trustee companies or any authorised trustee company fulfil the proposed roles are unsatisfactory at this stage. The Commission is yet to review the Trustee Companies Act 1967, which it will do in the review of corporate trustees, and it would be premature to place other trustee companies on a footing with the Public Trust before reforms are properly considered. The Public Trust has the advantage over other trustee companies of being accountable to the Government because of its status as a Crown entity. There would be the potential for the Government to have a contractual relationship with the other statutory trustee companies to provide the proposed services. However, those trustee companies are generally not given roles such as these, especially not in relation to private family trusts.

15.11A new independent quasi-judicial panel or trusts ombudsman would have some advantages over the Public Trust. They could provide a high degree of independence and expertise, and would be well suited to the role. However, for the same reasons that we have not pursued these options after giving them consideration earlier in the review, we cannot recommend them at this stage. We consider that the costs are currently prohibitive. If in future there is appetite for the establishment of a new body, we suggest that these options should be considered further. The option of a new independent dispute resolution body or decision-maker was discussed in the Fifth Issues Paper and the Preferred Approach Paper.305

Reasons for recommendationTop

15.12We are convinced that it is necessary to have a neutral fiduciary power holder available under the new Trusts Act. Currently the Public Trust fills this role, and we are proposing an expanded role for it. It would be possible to create an alternative body, such as an independent panel, to carry out the proposed roles. However, we think it is unlikely that the Government would choose to fund a new body, and a better option is to utilise the body that currently holds this position.

15.13The Public Trust is in the unique position of being a trustee company that is a Crown entity. It is, therefore, subject to public accountability and control in a way that other trustee companies are not. The Public Trust has a long history of carrying out trusteeships and supervisory roles in relation to trusts. It has the structures and expertise in place to handle the new roles. The new roles that we recommend the Public Trust fill are a significant aspect of the package of law reform put forward in this Report, as they provide an alternative to a costly court application in situations where there are mechanical difficulties that need resolving. Our view is that the Public Trust is the best option for carrying out the new roles.

299For instance, Insolvency Act 2006, ss 273, 283−289, 385 and 387; Protection of Personal and Property Rights Act 1988, ss 37, 39, 46, 91 and sch 2; Property Law Act 2007, ss 109 and 112; Public Works Act 1981, ss 81 and 96−98; Life Insurance Act 1908, s 69; Administration Act 1969, s 19.
300Trustee Act 1956, s 46(4).
301Trustee (Public Trust) Amendment Act 2013, s 4. We understand that this amendment will no longer be required and will be repealed once the Financial Markets Conduct Bill 2011 (342-3) is in force as that legislation will provide an alternative process for replacing a securities trustee.
302Ministry of Justice Regulatory Impact Statement: Trustee Amendment Act (8 May 2013).
303For instance, Property Law Act 2007, s 112.
304The Treasury Guidelines for Setting Charges in the Public Section (December 2002).
305Preferred Approach Paper, above n 298, at ch 13; Law Commission Court Jurisdiction, Trading Trusts and Other Issues: Review of the Law of Trusts – Fifth Issues Paper (NZLC IP28, 2011) at ch 4.